Dollar Advances Versus Yen Amid Fed Outlook; Aussie Jumps

Aug. 6 (Bloomberg) -- The dollar rose for the first time in
three days against the yen amid speculation a recovery in the
U.S. economy will prompt the Federal Reserve to withdraw
stimulus that tends to debase the U.S. currency.

The yen weakened versus most of its 16 major counterparts
as gains in Asian and European stocks damped demand for the
relative safety of Japan’s currency. The Australian dollar
strengthened against all of its most-active peers after the
Reserve Bank damped speculation on further interest-rate cuts
after reducing borrowing costs to a record low.

“If the U.S. economy does continue to gain upward
momentum, it would support a move higher in U.S. yields and help
lift the dollar versus the yen,” said Lee Hardman, a currency
strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The
door is open for the Fed to begin tapering before year-end.
We’ve had more positive news on the data front and we could be
seeing some improvement on the global-growth outlook.”

The dollar strengthened 0.1 percent to 98.43 yen as of
9:58 a.m. London time after climbing to 99.95 on Aug. 2, the
highest level since July 25. The U.S. currency was little
changed at $1.3263. The yen weakened 0.2 percent to 130.54 per
euro after appreciating 0.8 percent yesterday.

The dollar will advance to 105 yen within six months,
Hardman said, citing Bank of Tokyo-Mitsubishi’s forecasts.

Payrolls, Services

U.S. payrolls increased by 162,000 in July, the smallest
gain in four months, the Labor Department said on Aug. 2, while
data yesterday showed service industries expanded at the fastest
pace in five months.

Fed Bank of Chicago President Charles Evans will speak to
reporters today. Evans has cited jobs growth of 200,000 as a
benchmark for labor-market improvement. Cleveland Fed President
Sandra Pianalto is due to speak on monetary policy and the
economic outlook tomorrow.

The Australia’s dollar advanced for a second day as the
central bank said it would adjust policy to foster growth and
keep inflation contained.

Governor Glenn Stevens cut the overnight cash-rate target
by a quarter percentage point to 2.5 percent and said the
Reserve Bank of Australia’s board “has previously noted that the
inflation outlook could provide some scope to ease policy
further.” That contrasted with last month’s view the outlook for
prices “may provide some scope for further easing.”

“They haven’t said that they have more room to cut
rates,” said David Forrester, a senior vice president for
Group-of-10 currency strategy at Macquarie Bank Ltd. in
Singapore. “It’s considered more of a neutral bias than an
easing bias. I think we’ll see a squeeze” higher in the Aussie.

Australia’s dollar rose 0.7 percent to 89.91 U.S. cents
after sliding to 88.48 cents yesterday, the weakest level since
August 2010.